BOJ Rate Hikes on Hold Through September Amid Trump-Related Risks

According to a recent survey by Reuters the Bank of Japan will likely remain on hold and refrain from raising interest rates until September as it evaluates the economic impact of the sweeping tariffs imposed by President Donald Trump in the U.S.

Of the 62 economists surveyed from May 7 – May 13, 59 (95 percent) believe that BOJ will not change policy at its meeting on June 17. The tenor has changed since April, with 67% of responders (39 of 58) now predicting that the key rate will remain at 0.50% during the July-September quarter, a sharp increase from 36% a month ago.

Now that interest rates are at a pause, many still expect a year-end monetary tightening. Just over half of economists surveyed (52%) expect a 25-basis-point rate hike before the end of December. The median forecast for the central bank going into the end of September fell from 0.75% to 0.50%, while their year-end forecast is at 0.75%.

“The BOJ will need to delay rate increases to gauge how the new tariffs from the U.S. affect the economy,”commented Masato Koike, senior economist at Sompo Institute Plus. Still other analysts like Takumi Tsunoda from the Shinkin Central Bank Research Institute considered that the positive cycle between wages and prices would contribute to economic growth later this year.

The tariffs, which began on April 2, cover a 10% levy on the majority of countries and 24% for Japanese exports will begin as of July unless a bilateral agreement is reached. Almost all economists surveyed (96%) reported that they see little need for BOJ rate cuts.

As markets have begun to predict a mild rate hike before 2025 still BOJ Deputy Governor Shinichi Uchida stressed continued confidence in wage and price growth generally and even amid ongoing tensions in global trade.